Correlation Between BII Railway and Canadian Utilities
Can any of the company-specific risk be diversified away by investing in both BII Railway and Canadian Utilities at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BII Railway and Canadian Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BII Railway Transportation and Canadian Utilities Limited, you can compare the effects of market volatilities on BII Railway and Canadian Utilities and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BII Railway with a short position of Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and Canadian Utilities.
Diversification Opportunities for BII Railway and Canadian Utilities
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BII and Canadian is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities and BII Railway is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BII Railway Transportation are associated (or correlated) with Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of BII Railway i.e., BII Railway and Canadian Utilities go up and down completely randomly.
Pair Corralation between BII Railway and Canadian Utilities
Assuming the 90 days horizon BII Railway Transportation is expected to generate 2.03 times more return on investment than Canadian Utilities. However, BII Railway is 2.03 times more volatile than Canadian Utilities Limited. It trades about -0.05 of its potential returns per unit of risk. Canadian Utilities Limited is currently generating about -0.22 per unit of risk. If you would invest 2.85 in BII Railway Transportation on November 2, 2024 and sell it today you would lose (0.05) from holding BII Railway Transportation or give up 1.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BII Railway Transportation vs. Canadian Utilities Limited
Performance |
| Timeline |
| BII Railway Transpor |
| Canadian Utilities |
BII Railway and Canadian Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BII Railway and Canadian Utilities
The main advantage of trading using opposite BII Railway and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway position performs unexpectedly, Canadian Utilities can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Canadian Utilities will offset losses from the drop in Canadian Utilities' long position.| BII Railway vs. MOVIE GAMES SA | BII Railway vs. Jacquet Metal Service | BII Railway vs. GAMESTOP | BII Railway vs. AMAG Austria Metall |
| Canadian Utilities vs. Rayonier Advanced Materials | Canadian Utilities vs. NEWELL RUBBERMAID | Canadian Utilities vs. VULCAN MATERIALS | Canadian Utilities vs. Summit Materials |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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